Builders Capitulate, Admit Slowdown

Hang on to your real estate investment and you could get the same apartment at less than 50% within six months.

After months of living in denial, now even large builders and developers , financiers and brokers have come on record to say that there is a huge slowdown in real estate. However, they are not cutting rates because once a rate cut is advertised, the downward spiral will start accelerating.

“We have not seen any major movement in prices of office buildings over the last three months. In fact, prices in the central business district of Delhi have remained hard. Rentals in the suburbs have stagnated,” said Pradeep Jain, chairman, Parsvnath Developers.

“The days of super-high growth are over. Now developers are only going for those properties which are reasonable,” said Abhishek Kiran Gupta of Jones Lang Lasalle Meghraj.

“Companies book and lease space keeping three- to five-year horizon. But given the slowdown in economy, they tend to scale down their demand projection of space. Reduction in demand means more supply hitting the market,” said Jai Mavani, executive director, KPMG.

“Apartment sales have gone down by 20 to 30 percent in Mumbai. Developers are doling out goodies like stamp duty relief, free parking and interiors to boost sales,” said Rajiv Sabharwal, head, retail assets, ICICI Bank.

“New residential projects have slowed down. Only big developers are launching new projects. Buyers are also waiting whether prices will come down,” adds ICICI’s Sabharwal.

Speculators have exited many areas like Greater Noida, Kundli and even some parts of Gurgaon. JLLM Chairman Anuj Puri believes that investors, who comprise nearly 20 per cent of property buyers, are staying out after the stock market crash. “The absence of speculator interest has led to a 15 to 20 percent correction in areas like Gurgaon and Noida,” he said.

“No upward movement of prices has been evident in Bangalore’s commercial business district for the last four to five months. Residential realty prices have stagnated due to an increase in supply, much more than the demand,” said Samira Chandra Gupta, regional director, Colliers International.

Others concur with this view. “Prices have been generally flat. In many localities prices have fallen sharply. The reduction is greater in peripheral areas and to some extent in premium or super-luxury residential properties,” said Shivaram Malakala, executive director, Habitat Ventures. Like elsewhere, prices are expected to remain bearish, with Malakala saying they could fall further by up to 10 to 15 per cent.

"They are holding on to the prices to maintain the momentum,” said Rajesh Mehta, a leading property consultant in Mumbai, adding: “April and May are the key months as far as property deals go. If transactions do not pick up, prices of apartments will fall at least 10 to 15 percent”.

You can read the full Business Standard article here